Timely invoice processing is a vital part of vendor management. Paying vendor invoices on time is key to maintaining healthy relationships with agencies, freelancers, and other partners that help your business grow. But with so many tasks to manage on a day-to-day basis, bills often get lost in the shuffle.
According to a survey by QuickBooks, mid-sized businesses were owed an average of over $300,000 in late payments. In other words, many customers don’t pay on time. Being a business that pays supplier invoices predictably sets you apart as a valued customer and fosters goodwill between you and your vendors.
When your business is just starting, paying invoices is a relatively simple process. You get the bill, check it for accuracy, pay it and register it in your bookkeeping. But as you grow, more people (and bills) get involved. Having a reliable process for paying bills on time becomes fundamental as more employees and vendors join your team. Automating this process is the easiest way to ensure all your bills get paid on time.
Here's an overview of the processes involved in bill or invoice processing and how to simplify the process using Ramp's Bill Pay platform.
What is invoice processing?
Invoice processing is the series of steps needed to keep track of an invoice or bill, from receipt all the way to recording it as paid. Historically, organizations required an accounts payable department (AP department) to handle incoming invoices. But digitizing and automating this workflow lets you keep track of invoices without hiring an entire department or asking your team to spend dozens of hours a month managing this workflow.
How invoice processing typically works (and common challenges)
Although digital solutions are now widespread, we’re still emerging from an era of paper invoices and snail mail. Many habits are inherited from a time before invoice processing automation.
Here is the step-by-step of how invoices are typically processed, along with the challenges they bring.
- Receive the invoice or bill: This is only step one and already there are some potential headaches. Who is the invoice addressed to? Does this team member know where to forward the invoice or get it approved? As businesses grow and new team members are onboarded, best practice is to provide information on how invoices are handled.
- Extract or capture invoice data in a standardized format: Vendors bill in different formats. Some might send their invoice through a payment processing system, others may opt for emailing a PDF, and some might even mail a paper copy. Centralizing and standardizing this information is needed to keep track of all of these invoices and prevent duplicate payments.
- Verify information and approve invoice: Another workflow danger zone. The right person needs to get eyes on the invoice and approve it in a timely manner. This often translates into the accounts payable team chasing after approvals. Forwarded emails get stuck in inboxes and the “approved” response can also get overlooked.
- Process invoice for payment: Whew! The invoice is finally ready to be paid.
- Record invoice as paid: Finally, someone needs to record the invoice as paid in a centralized and standardized format so that other team members, third-party accountants and new hires can clearly see what’s already been covered.
As you can see, there’s a lot of room for human error in traditional invoice processing. A missed email or confusion about the next step of the AP process leads to delayed invoice payments—or worse, late payments that vendors need to hunt down.
Beyond this, inefficient invoice processing can lead to problems with spend tracking, expense management, employee reimbursement, and more.
Luckily, most of these headaches can be avoided by bringing your invoice processing into the era of accounts payable automation.
How to automate invoice processing to save time and boost efficiency
Automated invoice processing doesn’t just help you make payments on time. It gives you more control over your business by saving you time and helping you manage cash flow.
Because it’s such a crucial part of keeping your business going, Ramp has developed powerful features to streamline invoice processing from initial receipt through final payment and record keeping.
Here’s how you can automate your invoice processing with Ramp.
Step 1: Control spending before it happens
A true AP automation solution starts before any bills are ever received. With Ramp, you can predetermine who should receive which invoices so that bills are automatically routed to the right person.
Another layer of spend control involves setting spending limits for approved requests and pre-approving specific vendors. This can all be done by generating virtual business cards for employees and for recurring bills.
Step 2: Digitize and standardize invoices automatically
Logging invoices shouldn’t take up any time. With Ramp’s AI-powered invoice processing and digital matching, expenses are standardized in seconds. Ramp automatically registers uploaded invoices and keeps track of corporate card payments in real-time.
Step 3: Approve spending with the click of a button
You don’t want employees wasting time chasing down the right person for approval. Ramp automatically notifies managers and execs about requests that need their attention. These approvals happen in the same system and each step can be customized based on the amount of each request.
If your team uses Slack, you don’t even have to log into another platform to approve requests. Everything can be done in Slack, from initial request to notifications and final approval.
Step 4: Pay bills your way
Whether you’re paying bills and invoices through ACH, credit card or check, Ramp gives you the flexibility to pay in the way that makes sense for that vendor relationship. It takes seconds to send payment and all of it gets tracked in the same system—no matter which payment type you choose.
Step 5: Automate bookkeeping with accounting integrations
You’ll need to keep track of all of these invoices and payments for accounting purposes. Ramp integrates with powerful small business accounting software like Xero and QuickBooks so that all of your information is ready for tax time and beyond.
Ramp: the only tool you need to streamline invoice processing
It’s tough to keep track of vendor management best practices. Even if you learned about invoice processing in school, implementing best practices when you’re leading a business gets overwhelming, fast.
Having a partner like Ramp saves you time by providing forward-thinking automations at every step of the invoice processing workflow.
Ramp is more than a corporate card. It’s a centralized platform that gives you visibility and control over your business spend, right now and as it grows.